Massachusetts: 'Hollywood of the East'

BOSTON — Movie tax breaks embraced by Gov Deval Patrick and star-struck lawmakers could end up costing Massachusetts $138 million in lost revenues even as they spark a filmmaking renaissance.

THE ASSOCIATED PRESS

BOSTON — Movie tax breaks embraced by Gov. Deval Patrick and star-struck lawmakers could end up costing Massachusetts $138 million in lost revenues even as they spark a filmmaking renaissance in the Bay State, according to a report by the state Department of Revenue.

Patrick and House Speaker Salvatore DiMasi have touted the tax credits, saying they've provided jobs and are helping turn Massachusetts into a Hollywood of the East. The success is even feeding talk on Beacon Hill of the construction of a production studio.

But the potential loss of millions in revenues comes as the state struggles with a looming $1.3 billion spending gap and is searching for revenues to help pay for the landmark health care law.

The report is quick to point out that some of the lost revenues will be offset by increased personal income, business and other taxes generated by film productions that wouldn't have been made here without the tax breaks.

The report also finds that the 88 film productions with end dates between 2006 and 2008 — and thus eligible for the film tax credits and sales tax exemptions — spent a total of $544 million in the state.

"That's essentially what the credits were intended to do, bring new dollars to Massachusetts," said Nicholas Paleologos, executive director of the Massachusetts Film Office.

Paleologos said the true economic boost to the state is likely more than $1 billion when indirect spending is added in.

"In a gloomy economy the one glimmer of light is over here on the creative economy side," he said.

The first version of the film incentive law took effect in January 2006 and created a 20 percent tax credit for payroll expenses, a 25 percent credit for production expenses and a sales tax exemption.

A second version, which took effect January 2007, increased the payroll tax credit to 25 percent, lowered the threshold to qualify from $250,000 in expenditures to $50,000, and eliminated a $7 million limit for tax credits on any single movie.

"The law has been a tremendous boost for the creative economy in the commonwealth with the report showing over half a billion dollars in new economic activity in Massachusetts," said Patrick spokesman Kyle Sullivan.

DiMasi's office also said the new numbers show that the tax credits are working

"In two years, we have had 10 major films — bringing in $180 million," DiMasi spokesman David Guarino said in a written statement. "The film tax credit has been a huge success for Massachusetts, by any definition."

The tax credits have been an undeniable boon to film production in Massachusetts.

In 2005, the last year before the tax credits took effect, the state saw just one major movie shot here — the Oscar-winning "The Departed," although a large portion was actually shot in New York.

This year, as many as a dozen major movies could be shot in the state, according to Paleologos.

"These pictures were going to get made, the only question was where?" he said. "That could have been Rhode Island or Ontario or Hungary, but it turned out they were shot here and that's in large part because of the incentives."

But the report also cautioned that any estimate of the economic impact of the tax credits "needs to take into account the reduction in state government spending that occurs as a result of decreased tax revenues available to state programs."

The tax breaks have also drummed up talk on Beacon Hill for construction of a movie studio.

Many of the productions shooting here now are using temporary warehouse space, including an empty mall space in the Brighton section of Boston.

Quincy state Rep. Ronald Mariano has a bill that would offer tax incentives for the creation of a film studio. Possible locations include a site in Weymouth and 1,000 acres of land in South Plymouth.